Company Town | THE BIZ / CHUCK PHILIPS

A Payola Probe With No Payoff

Ten years ago, the government's probe of the music business seemed to have all the makings of a major scandal: sex, drugs, rock 'n' roll, and seedy Mafia-laundered payola.

But thanks to a bumbling series of government gaffes, the investigation turned out to be a bust--costing taxpayers more than $10 million without putting a single criminal behind bars.

The case, which spurred grand jury investigations in five cities, came to an end two weeks ago, when a Los Angeles judge accused prosecutors of violating the speedy trial act and dismissed a 57-count indictment against Burbank record promoter Joseph Isgro.

"This thing has been nothing but a joke from start to finish," says Isgro, who seven years ago was indicted for payola, racketeering and conspiracy to distribute cocaine. "I'm probably the only guy whose case took seven years to get thrown out on a violation of the speedy trial act. I've pretty much put it all behind me by now, but I must admit, it still makes me mad."

Taxpayers might also be miffed if they realized how badly their tax dollars were mishandled in the prosecution of Isgro's case, which changed hands several times as a series of government officials were either fired, sanctioned for wrongdoing or forced out.

*

The case was dismissed once before after a judge in 1990 rebuked a senior prosecutor for coaching perjured testimony from the government's key witness. Revived by the U.S. 9th Circuit Court of Appeals in 1992, the case was thrown out again last month. The latest setback is likely to be the last for the beleaguered payola probe. Officials at the Justice Department, sources say, have decided to throw in the towel.

"From the standpoint of the government," said one source in the Justice Department, "this case has been a snake pit from day one."

Isgro was indicted in November 1989 after the Justice Department abandoned its probe into alleged organized crime figure Salvatore James Pisello and his involvement in the sale of cut-out records at MCA Records. The allegations about Pisello's affiliation with MCA came at a time when the Universal City-based entertainment combine was being shopped for sale.

"The reason that the government had no chance of winning this case is because it had no case to begin with," said Donald M. Re, Isgro's defense attorney. "The primary purpose of Joe's indictment was to draw attention away from a previous government probe into possible illicit activities at MCA Records--and to that end, it was absolutely successful."

Re isn't the only one who thinks Isgro's case was politically motivated. Marvin Rudnick, a former assistant U.S. attorney with the organized crime strike force in Los Angeles, says he was removed from the MCA case because of pressure on the government from top MCA officials.

After the Justice Department fired Rudnick, many news reports suggested that the government had mishandled the investigation because it implicated Hollywood friends of former President Ronald Reagan.

"The government spent so much money on this case they had to salvage it somehow," Isgro said. "All of a sudden they came after me."

*

Isgro was one of the most successful members of the Network, a loose affiliation of nine key independent record promoters who reportedly charged the record industry $60 million a year to ensure radio airplay for songs.

The payola scandal first erupted in February 1986 following an NBC News television broadcast that said Isgro and another record promoter met several East Coast organized-crime figures at a hotel before a rock awards dinner. The NBC report alleged that several members of the Network were offering payola to radio programmers in the form of cash, drugs and prostitutes to get songs played.

Isgro and other promoters denied the charges, but within days of the telecast, 12 record companies cut their ties to any firm doing independent promotion. The allegations triggered grand jury investigations in Atlanta, Miami, New York, Los Angeles and Newark, N.J.

The case was based primarily on the testimony of radio programmers and former associates who plea-bargained with the Justice Department. Most of the charges were payola misdemeanors, but prosecutors broadened the case into a major racketeering and obstruction of justice case based on the testimony of Isgro's former accountant, Dennis DiRicco.

U.S. District Judge James M. Ideman abruptly dismissed the charges against Isgro in September 1990, after learning that lead prosecutor William S. Lynch concealed information that contradicted DiRicco's testimony against Isgro. (DiRicco, a former IRS agent, had been found guilty of laundering money for a Columbian drug operation. Lynch failed to disclose that DiRicco testified in that case that Isgro had done nothing wrong. DiRicco cut a deal for his testimony against Isgro and never did time.)